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Trade Finance Series: Trade Based Financial Crime and Compliance

11 May, 2018Professor James E. Byrne

Male-professionals-laughing-at-conferenceWhat is “compliance”? For years compliance involved determining whether documents presented under a letter of credit (LC) matched its terms and conditions. This meaning of compliance was linked to the independent character of the LC undertaking and was in place for more than a century.

Today, and for perhaps the last decade, when LC and trade professionals talk about compliance, they often are referring to the regulatory system governing trade based financial crime. Although not apparent from the simple confluence of the words, the notions differ radically and may even conflict. 

In the world of LCs, documents are examined on their face without regard to the underlying transaction or the realities that they represent.

In the world of regulatory compliance, the underlying substance is what matters: What are the goods? Are there any? Are they properly priced? Who is the recipient?

Rapid Increase in Regulation of Trade Finance

This change is dynamics has led to massive upheaval in the industry of trade finance and was, in part, the inspiration behind the Institute of International Banking Law & Practice, the London Institute of Banking & Finance, and Coastline Solutions coming together to create the Certificate in Trade Finance Compliance (CTFC), a certification course specifically designed for those involved in both trade and compliance. It has also inspired today’s event.

Trade based financial crime compliance, perhaps to a greater degree than any other aspect of trade finance, is an ever-evolving field. National governments are constantly issuing new regulations and laws; ones that at times sharply contrast with the regulations and laws of other nations. Intergovernmental and nongovernmental organisations have been prodigious at releasing standards and guidance, designed to educate financial institutions and governments on the best practices to guard against financial crime. Technology has advanced rapidly in recent years, leading to increased and new difficulties in combatting financial crime while simultaneously offering new innovative solutions to assist financial institutions remain compliant.

Two-male-professionals-in-conversation-at-conferenceCritical Importance of Knowledge and Experience

However, despite the abundance of resources available to financial institutions, there is perhaps no greater resource than the knowledge and experience of those immersed in the field. One of the goals of this event is to bring together leaders in the field of trade based financial crime compliance and to offer an avenue where questions can be asked and ideas can be shared.

Trade based financial crime compliance is an enormous and important field. It imposes great demands on financial institutions and regulators because the stakes involved are so high: stopping the laundering of funds that can be used to facilitate criminal activity; combatting the financing of terrorism; preventing the violation of sanctions that are designed to maintain national and global security.

The basis of this discussion will form part of our first Annual Trade Finance Compliance Conference taking place on the 31st May in London. We hope that this event will assist you in your efforts to achieve these goals and will become a tremendous resource for the industry in the years to come. Find out more and register your place here.

Find out more about the CTFC qualification